Deltona will freeze, but not lower water, sewage rates

BEACON PHOTO/MARSHA MCLAUGHLIN
Action — Yolanda Marshall leads the action as the DECA fashion-and-marketing club at Deltona High School stages a "Zumbathon" Oct. 19 at Deltona High School. While these women were taking action to raise money for the Susan G. Komen Breast Cancer Foundation, the Deltona City Commission has been taking action on water and sewage rates for city residents. (DECA stands for "Distributive Education Club of America." It's an international association of marketing students.)

6-1 vote comes at second special meeting

By Al Everson
BEACON STAFF WRITER

posted Oct 26, 2012 - 5:38:34pm

Seven tiring hours of debate spread over two nights, with volumes of conflicting information and some parliamentary pyrotechnics, ended in the undoing of the plan to lower Deltona's water and sewer rates.

At the end of a special meeting Oct. 24, the Deltona City Commission voted 6-1 to continue the freeze of water rates — at least for now — and to give sewer customers a $25 reduction in their base monthly charge.

"This is not going to break the city, but it is going to help the residents," City Commissioner Zenaida Denizac said.

The city administration had suggested a $20 easing for homes connected to the sewer system.

The commission decided, too, to hire a consultant to propose a new rate structure. That study may take about four months.

The meetings Oct. 23 and Oct. 24, followed an earlier decision by the City Commission to roll back water and sewage rates to the 2010 prices.

That action had come after weeks of public outcries for relief, especially from customers of the city's sewage system. At the special meetings, customers repeated their complaints.

"It's a mockery what's happened in the past few days," said Tom Wells. He said he and his neighbors, who are among the 6,000 sewage-system customers, "need to see their bills lowered by $40 to $60."

While Deltona's water rates are in line with those in neighboring cities, the sewage rates are higher, partly because the comparatively small number of sewage customers.

"Nobody I've been talking to wants these high sewage rates," said Tom Premo, a candidate for the City Commission's District 4 seat.

Premo said the people he knows are struggling to pay their monthly bills.

"Our pay is not going up in this economy," he told the City Commission. "What is going down is our standard of living."

The commission on Oct. 15 had voted 4-3 to reduce rates by about 37 percent, and also to avert a planned 17.25-percent hike in water and sewage charges.

That rate increase was the last of five annual increases started in 2008. Before that, Deltona's utility rates had not increased for many years, and consultants told the city that the utility system was losing its ability to pay for maintenance and expansion, because of the suppressed rates.

Under parliamentary rules at the Oct. 15 meeting, the rate cut was ordered by a simple motion, but a resolution was required to make it binding.

The Oct. 23 special meeting was called to act on the resolution, but, instead, the ensuing debate prompted Denizac to call for tabling, or delaying, a vote on the resolution. Because a successful motion to table halts discussion, another special meeting was called for Wednesday evening.

The possible rate reduction had caused panic among some city officials, who feared Deltona would jeopardize its credit rating and would be unable to build new utility infrastructure, especially a planned sewage-treatment plant.

That $30 million facility, to be built on the east side of Deltona near State Road 415, is supposed to accommodate future growth in the Osteen area.

The city administration went all-out to convince the commission a two-year rollback would have negative consequences.

City Manager Faith Miller, her subordinates, and the city's financial adviser warned the City Commission that Deltona would default on the bond covenant for the city's $80 million purchase of the utilities in 2003.

Miller told commissioners that passing the resolution to reduce the rates would result in the loss of $4.5 million in operating revenues for the water and sewage systems.

"This is a default," Miller said. "The new Wastewater Treatment Plant would not be funded under this scenario."

Another moving part of the whole story is the city's intention to refinance its bonded debt to secure a lower interest rate. The interest rate will depend on Deltona's credit rating, which is now AA.

Advisers warned that reducing the utility rates could affect that rating, and cause the city to have to pay a higher interest rate.

"Having a large drop in revenues going to have a significant effect," said Deltona's financial adviser, First Southwest Senior Vice President Mark Galvin.

Galvin also noted the city may have to pay $21 million to bondholders if the city's credit rating falls below BBB+. Rolling back rates, he warned, would be a violation of the bond agreement.

"If you intentionally violate the bond covenants, you are creating a problem for the city," City Attorney Becky Vose advised."What lender is going to lend money to a city that has lowered rates?"

"Obviously, we do not want to default on our bond covenants," Denizac said. Earlier she had favored the rollback.

Two commissioners voiced frustration over changing information and conflicting figures, including revenue projections.

"The numbers keep changing," Commissioner Fred Lowry said.

Lowry said his efforts to get accurate information were "like trying to nail Jell-O to the wall."

Commissioner Herb Zischkau accused the city's staff of presenting "lies, mistakes and misleading information."

"We should not make a decision based on inaccurate information," Zischkau said.

Rebukes came from Mayor John Masiarczyk.

"Honorable is not a word I would use for you," the mayor told Zischkau. "You trash staff. ... Be a gentleman, and quit calling people liars."

Under questioning from Zischkau, Deltona Finance Director Bob Clinger conceded the information and numbers were not absolute.

"Neither I now anybody in the City of Deltona can accurately predict what is going to happen," Clinger said. "There's no way to predict usage. ... If you lower your rates 27 percent, will you lose 38-percent of your revenue? Nobody really knows the answer to that."

The City Commission ultimately settled on limited relief for sewer customers, while keeping the water rates at their 2011 levels.

The rates had been set to rise Oct. 1, but the freeze remains in effect.

City Commissioner Heidi Herzberg, who opposed cutting rates, cast the lone vote against the new resolution.

The City Commission may also establish a "hardship fund" for utility customers having difficulty paying their monthly bills.

— al@beacononlinenews.com

Reader Comments

The comments posted below are posted by readers, not by The Beacon staff. These comments express the views and opinions of the authors, and not the administrators, moderators or webmaster. The comments forum is governed by these rules. Please use the report abuse link if you find offensive comments.

Comment on this article

Commenting is closed for this article.

If you would like to contribute a letter to the editor, please click here.

Did you find this story interesting or informative? Subscribe to The West Volusia Beacon to read more stories by Al Everson, along with others from our award-winning writers. Subscribe now!